1) It only prohibits the Federal Government from abridging the freedom of speech. Local state authorites are not Congress. It only prohibits Congress.
yes, and in some instances (maybe all? i'm not sure) federal law trumps local laws. that instance is specifically mentioned in the article, as to why Montgomery County's law about the display of obscene material does not apply in their public libraries.
2) It seperates the Government from the Church, not the church from the Government. This pharase "Seperation of church and state" is a bogus idea.
the constitution says that congress shall not make laws infringing a persons right to practice whatever religion they choose, nor shall they make any laws that could be construed as establishing an "official" religion. that is what the "separation of church and state" is. yes, that phrase is not in the constituion. jefferson used it when he responded to a letter written to him by a church in Connecticut, who were unhappy with the laws regarding religion in that state.
the constitution says nothing about not letting religion influence congress. so technically, there is nothing wrong with that. take abortion, for example. most people that want it outlawed probably base their reasons in religion. but if the law were to be overturned, the passage of that law would not infringe on a persons right to practice whatever religion they choose, nor would it be construed as establishing an "official" religion. though this is not to say that there are not other issues concerning the legality or morality of abortion.